Container ships travel between a fixed set of origins and destinations in round trips, inducing a negative correlation in their freight rates. I study the implications of this round trip effect on international trade and trade policy. I identify this effect and develop an instrument using it to estimate the impact of transport costs on trade. I simulate counterfactual import tariff increases in a quantitative model and quantify the importance of endogenizing transport costs with respect to this effect: an exogenous transport costs model predicts a trade balance improvement from protectionist policies, while the round trip model finds the opposite.
Wong, Woan Foong.
"The Round Trip Effect: Endogenous Transport Costs and International Trade."
American Economic Journal: Applied Economics,
Firm Behavior: Empirical Analysis
Trade Policy; International Trade Organizations
Empirical Studies of Trade
Railroads and Other Surface Transportation
Transportation: Demand, Supply, and Congestion; Travel Time; Safety and Accidents; Transportation Noise